George Burley's gamble of leaving Rangers pair Barry Ferguson and Allan McGregor on the bench as punishment for a breach of team discipline looked set to pay off when a lively first-half display resulted in McCormack giving his side a well-deserved lead at the break. However, after rarely threatening in the first period, Indridi Sigurdsson equalised for Iceland early in the second-half after the Scotland defence were slow to react to a rebound.
Fortunately for under-pressure Burley, Hibernian striker Fletcher restored Scotland's lead to give them three vital points and move them up to second place in Group 9 as they chase a potential play-off spot.
The pre-match surprise was that regular Scotland captain Ferguson and keeper McGregor were given places on the bench. The pair are reported to have apologised after a row with Burley following an early morning drinking session as the team returned to their hotel from Netherlands on Sunday.
The Scotland manager made a host of changes for the must win game with James Morrison, Alan Hutton and Fletcher joining Stephen McManus and Craig Gordon back in the starting line-up. The pre-match problems seemed to have galvanised the Scots with wide-men McCormack and Morrison looking lively as the Iceland players struggled to get hold of the ball.
In the 20th minute, Kenny Miller tried his luck from the edge of the box but his curling effort was easily saved by Gunnleifur Gunnleifsson. Miller should have done better when Morrison played him into the box but he dithered and was tackled just as he was about to let fly in the 38th minute.
But just a minute later Scotland took a deserved lead through McCormack after great work on the right by Hutton. The Spurs defender sped down the right wing beating Helgi Danielsson before cutting in and crossing for McCormack, who curled the ball into the top right-hand corner.
Hutton forced Gunnleifsson into a great save at the beginning of the second-half when he fired in a low drive following a good one-two with Hibernian's Fletcher. However, Iceland were on level terms in the 54th minute through Sigurdsson.
The midfielder was first to react to slot home a low shot past Gordon after Palmi Palmason's fierce long-range drive crashed off the post. McCormack was then presented with two free-kicks in dangerous positions on the edge of the visitors' box but both efforts barely tested the keeper.
Scotland regained the lead through Fletcher in the 65th minute. Celtic captain McManus did well to head a Morrison corner back across goal and the Hibs striker rose highest to power a header past Gunnleifsson.
In the 82nd minute West Bromwich Albion midfielder Morrison stung the palms of Gunnleifsson when he fired in a fierce free-kick but the keeper managed to clear the danger. Keeper Gordon was then the hero for Scotland as he pulled off two superb last minute saves from Heidar Helguson as Iceland pushed for the equaliser.